Governor Bush Talks Taxes

December 02, 1999

Offering a tax-cut plan is something of a rite of passage for Republican presidential candidates, whether or not they truly believe in their own medicine. Ronald Reagan believed. Bob Dole never seemed to be convinced by his own rhetoric.

Now it is Texas Gov. George W. Bush's turn; he presented his plan Wednesday for tax relief. It's a good bet he believes in it--he has cut taxes in Texas. And in principle, the plan has reasons to commend it.

Bush's $483 billion plan would reduce marginal tax rates across the board, yielding a lowest rate of 10 percent and a highest rate of 33 percent. He would double the tax credit for children, do away with inheritance taxes, reduce inequities in the "marriage penalty" and promote charitable giving. He would phase in the cuts over five years. He resisted the lure to boost revenue estimates by assuming his cuts will spur economic growth beyond current projections.

Bush has a better chance of selling his plan to the public than Republicans have had in the recent past, because Bush recognizes his plan has to significantly benefit lower-income taxpayers as well as the wealthy. Boosting the child credit and reducing the lowest marginal rate to 10 percent from 15 percent would achieve that. By his estimates, this plan would eliminate the tax liability for some 6 million families.

This is a good starting point for the 2000 presidential debate. This would be a better plan if Bush were to simplify the tax code and close some unnecessary tax loopholes, a move that would reduce the drain on the treasury. But it is a solid point to start debate.

Still and all, that debate can't get swept up in the euphoria of budget-surplus rhetoric. Candidates shouldn't forget the advice of Federal Reserve Board Chairman Alan Greenspan, who has counseled for delaying tax cuts--and avoiding spending hikes--so surplus revenues can pay down federal debt.

Democrats Al Gore and Bill Bradley by some measures have already "spent" the next several years of surplus through a variety of proposed government programs. Bush would use all but $100 billion of the surplus to fund his tax plan.

But even that surplus may be fleeting. While the government was $123 billion in the black for fiscal 1999 (achieved only by counting Social Security revenues), there are already projections that federal spending may push the budget back into deficit next year. All those rosy projections used to fuel Gore's and Bradley's spending plans and Bush's tax cuts are based on assumptions of fiscal discipline that Congress and the White House have already violated.